Extract from IDS Executive Compensation Review 310

Pay prospects 2007

At the end of every year, we take stock of past pay trends and look forward to future developments to help companies prepare their salary budgets for the forthcoming round of annual reviews. To gain an insight into future pay prospects, we draw on the latest inflation reports, our own salary award data and other surveys to see what they suggest about trends over the coming year.

At the same time as the majority of salary awards are being conducted, pay budgets could be coming under increasing pressure from higher inflation if current forecasts are to be believed. If in response to there pressures salary awards for managers and professionals move upwards in the new year, it will be the continuation of a trend that began earlier in Spring 2006. Looking ahead to the second half of 2007, however, current inflation forecasts suggest that the pressures built up in the first six months will begin to ease and consequently, the pace of salary increases may start to come down. Using a variety of sources, including our own data on pay movements over the last two years, this article looks at pay and inflation predictions for 2007.